True Ventures: A Breakthrough in VC

VC?

I primarily chose to do my presentation on True Ventures because I knew so little about venture capitalism and wished to know more. It’s one of those things that I always wanted to be well-versed in, but just never got to learning. Given that I didn’t know anything about venture capitalism, I want to give a brief rundown on some key things to know about VC:

Firstly, venture capital is defined as financial capital provided to early-stage, high-potential, companies in exchange for equity in the companies it invests in. Basically, firms or very wealthy people invest money in various businesses in order to receive some sort of return, usually in the form of a share in the company’s equity. You might have heard of the terms “seed round” or “Series A” investing in the context of VC. Those refer to the different rounds of business financing:

  • Seed: Initial funding to build initial product and prove business model
  • Series A: Build core team and launch core product
  • Series B: Expand team and expand product portfolio
  • Series C: Scaling the business model
  • Series D+: Geographic expansion of business

So, how exactly does venture capital work?

  1. Entrepreneur gets introduced to multiple VC firms
  2. Entrepreneur gives pitches business to firms
  3. Term sheet written if VCs want to invest
  4. Build business further
  5. VCs repaid through: acquisition, IPO, or bankruptcy

 

 

True Ventures Overview

Founded in 2005 by Phil Black and Jon Callaghan, True Ventures seeks to serve the needs of early entrepreneurs. The team had a simple vision: create a new kind of venture capital firm that focuses on supporting the earliest stage Founders their ideas because the most important key to a startup’s success is the entrepreneur. They had a vision to realign the entire VC industry to focus more on the entrepreneur.

As such, they committed to providing the businesses they invested in with resources to foster community among families, employees, and neighborhoods. In order do encourage a spirit of education, they also developed several unique learning opportunities for Founders and their teams. Being a team who collectively founded 14 startups itself, True understands the entrepreneurial spirit. They know tech. And they know what it’s like to be a Founder.

In the beginning, the early stage investing market was dead. Popular phrases thrown around were “Early stage is dead.” “You don’t get paid for early stage risk.” “The world doesn’t need another venture capital firm.” Evidently, it wasn’t a position anyone wanted to be in at the time. Co-founders Jon Callaghan and Phil Black, along with other partners, entrepreneurs, and founders, had successful entrepreneurial track records and successful venture capital track records. Yet still there was a perception that the world didn’t need an early stage venture capital firm.

There were two large changes occurring in the VC industry at that time that was moving it away from seed and Series A funding. The first was that it was growing––meaning larger funds and larger checks. The other was that it was getting “distracted.” There were so many different types of specialty funds (China funds, India funds, a pandemic fund, etc.)––funds that were not in core early stage technology. It was the opportunity from which True Ventures was born.

Unique from some other VC firms, True believes in capital efficiency: “more venture; less capital.” Taking bold risks earlier on usually doesn’t require massive financing. In fact, they find that providing too much capital in the beginning can stunt creativity. They instead provide a sufficient first check, and later follow successes with significant follow-up investments.

Key Facts

  • Type of funding: seed stage & Series A
  • Number of investments: 404
  • Number of lead investments: 131
  • Number of exits: 65
  • Funds: $900M
  • First investment usually between $1-3M (very small from a fund standpoint)

Investments

True has dabbled in many facets of the tech startup industry. In the past, they have invested first in Web companies, the SaaS companies, then infrastructure companies. Following, it was consumer packaged goods, robotics, wearables, and some car industry opportunities, among others. They’ve also spent time in coresciences––including synthetic biology and neurosciences––reasoning that there was opportunity in these markets that may have been difficult to finance, but that the data revolution has made more capital efficient.

Portfolio Highlights

  • Madison Reed – Remember this one?
  • Runscope – Based in San Francisco, CA, Runscope is a SaaS-based company that provides solutions for API performance testing, monitoring, and debugging. It allows software developers, QA testers, DevOps engineers and otherAPI stakeholders to collaborate in creating, managing and executing functional API tests and monitors. (Acquired on September 28, 2017 by CA Technologies)runscope.png

runscope_945251_full.jpg

  • Connectifier – Now a wholly owned subsidiary of LinkedIn Corporation, Connectifier is an AI company that helps recruiters contact exceptional job candidates by leveraging a growing database of over 450 million candidates. It seeks to connect people and jobs, something that is profoundly important to our economy, and our lives. The company provides recruiters with a more complete view of prospective job candidates, and additional ways to connect with those candidates. (Acquired on February 25, 2016 by LinkedIn)

Screen Shot 2018-01-29 at 12.03.08 AM

  • MakerBot – Founded in 2009, MakerBot was one of the first companies to make 3D printing accessible and affordable with our first 3D printer, the Cupc
    ake CNC. Now, as a global leader in desktop 3D printing, MakerBot sets the standard in reliability and ease-of-use through every step of the desktop 3D printing process. (Acquired on June 27, 2013 by Stratasys)

    Screen Shot 2018-01-28 at 10.33.04 PMScreen Shot 2018-01-28 at 10.32.45 PM.png
  • Lexity – Lexity is a PaaS-based ecommerce cloud platform providing its own app store for online retailers to manage information with a single click. Retailers have the option to browse the App Gallery, a shop of marketing tools, and add the apps they want. (Acquired on July 31, 2013 by Yahoo)

lexity.png

  • Goodreads – Launched in 2007, Goodreads is the world’s largest site for readers and book recommendations. With a mission of helping people find and share books they love, Goodreads boasts a network of 65 million members, 2 billion books added, and 68 million reviews. (Acquired on April 1, 2013 by Amazon)

goodreads.jpg

  • Typekit – Typekit is a platform for bringing beautiful type into all kinds of other products, both inside and out of Adobe. “Adobe Typekit” allows quick browsing of fonts, easy use on the web and in applications, and endless typographic inspiration. (Acquired on September 30, 2011 by Adobe)adobe-typekit.jpg

9 thoughts on “True Ventures: A Breakthrough in VC

  1. Clare, awesome post! I did not know too much about venture capital before reading this post, and it was awesome to learn more about it! I had no idea that there were different steps in the funding process (Series A vs. B vs. C, etc.). I loved your point on True Venture’s focus on capital efficiency, and how funding an amount that exceeds the needs of the startup at the time can negatively effect productivity.

    I just saw in the news recently that True Ventures was the first investor in Blue Bottle Coffee. Nestle acquired Blue Bottle in a great deal for all parties! If you are interested in learning more, here’s the link:
    https://trueventures.com/congratulating-blue-bottle-coffee-2/

    Liked by 1 person

  2. Clare, this was an awesome beginner’s guide to venture capital! It was a great outline of the funding process on both the VC side and the entrepreneur’s side. I love True Ventures focus on the entrepreneur–because the most important key to a startup’s success IS the entrepreneur! I also found it interesting reading about their take on capital efficiency: “more venture; less capital” and the belief that providing too much capital, in the beginning, can stunt creativity. As you pointed out, they’ve invested in some cool companies. Excited to visit them in March!

    Liked by 1 person

  3. Clare, excellent post! My knowledge of venture capital was primarily through the television show Shark Tank, but now I have a much better understanding of what a VC firm does. It’s amazing to see the innovation that venture capital enables. It seems like True Ventures is on top of its game in terms of its investment choices. I’m very familiar with the Goodreads brand and recently tried the Blue Bottle Coffee that @paulosdbc mentioned. I anticipate that MakerBot and 3D printing will be promising for the future of tech.

    I sometimes overlook how important a role venture capital plays in bringing companies to the stage, but your post made me re-think that. Very much looking forward to your presentation!

    Liked by 1 person

  4. Great overview of True Ventures! There are so many different VC firms that it seems difficult to establish a differentiated advantage over other investors. I think the focus on early-stage investing and capital efficiency is interesting. This idea seems to challenge a phenomenon that is happening in the industry now where high valuations and funding rounds are being treated as an end rather than as a means to establishing great companies. Thanks for the post!

    Liked by 1 person

  5. Nice post. We’re actually visiting True Ventures and Madison Reed the same day. I tried to get them back-to-back, but to no avail! I saw them twice, 5 years apart, and they had made some really good investments in the interim period. If I am not mistaken, they also invested in Fitbit and Ring (doorbells). We can ask them!

    Liked by 1 person

  6. Hey Clare! After reading your blog post, I have become a big fan of True Ventures and their mission. It is understandable that, in the past, VC’s were not as focused on early-stage companies just because they have a much higher chance of failing. However, one great exit could make up for all of the failed investments. It will be awesome to compare True Ventures to the giant Sequoia Capital on our trip!

    Liked by 1 person

  7. Great blog post and in class presentation Clare! If True follows a model of capital efficiency, they must offer the firms in their portfolio different resources that supplement this value.
    Something Interesting: Though my KPCB research, I came across a powerful article about gender discrimination in the world of VC. The article was written in response to KPCB’s victory in a 2015 gender discrimination suit, and the last line of the article really stuck with me. Poking fun at the infamous VC moto of risk-taking and the *infuriating* concern that the trial might discourage firms from hiring women because they could think ‘Kleiner took the risk and look what happened’, the author writes: “If tech companies want to remain a band of risk-taking, fast-moving outsiders, the biggest risk they could take might be hiring more women and then creating company cultures where they can succeed.”

    If you want to check it out: https://www.nytimes.com/2015/03/28/upshot/what-silicon-valley-learned-from-the-kleiner-perkins-case.html

    Like

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